CALIFORNIA – Four plaintiffs filed, July 24, a class action lawsuit against the California FAIR Plan (CFP) Association, in Alameda County Superior Court, alleging the plan intentionally misrepresented the true impact of modifications to its policy to maximize profits.
As of mid-2024, approximately 350,000 Californians are enrolled in CFP, which serves as the insurer of last resort for property owners unable to obtain fire insurance through the standard market.
Several major insurance companies have said they would not issue new policies due to wildfire risk in California, leaving more homeowners with CFP as their only option.
Denied hundreds of covered fire claims
The class action lawsuit alleges that CFP does not provide the mandatory minimum coverage.
According to the Department of Insurance, policies must cover “direct physical loss” caused by fire and smoke.
However, in 2016 CFP filed an application to modify their policy stating that the changes will either provide no change in coverage or will provide some broadening of coverage.
The class action lawsuit says that changes to its new policy included a new definition of “direct physical loss.” This change amounted to a reduction of coverage and resulted in denials of claims that would have been paid under the prior policy.
“From July 2017 to the present, consistent with its warning to its customers and sales agents, CFP has denied or partially denied hundreds of covered fire claims in reliance on the changes to the insuring language of its policy for which it obtained approval in or about 2017,” says the class action lawsuit.
Continued to sell unlawful policy
The lawsuit says that in 2021, the California Department of Insurance (CDI) alerted CFP of its conclusion that the policy is unlawful because it fails to afford the mandatory minimum coverage required by California law.
“After receiving the CDI’s correspondence and directives, CFP did not comply with any of the CDI’s directives, and continued to sell the unlawful policy in California, including to Plaintiffs and the Class,” said the court document.
The plaintiffs say they want to obtain from CFP the mandatory minimum coverage required by California law.
They are represented by J. Edward Kerley and Dylan L. Schaffer of Kerley Schaffer LLP.
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 Association, in Alameda County Superior Court, alleging the plan intentionally misrepresented the true impact of proposed modifications to its policy to maximize profits.){kind=link}